Digital Currency Group Sues Subsidiaries Over $1.1B Promissory Note

Enterprise capital agency Digital Foreign money Group (DCG), the dad or mum firm of many entities tied to cryptocurrency and blockchain, has filed a grievance in opposition to two of its subsidiaries over a promissory observe to protect in opposition to the 2022 default of Three Arrows Capital (3AC).

In a Thursday submitting within the US Chapter Court docket for the Southern District of New York, DCG alleged that Genesis World Capital and Genesis Asia Pacific, each below the enterprise capital agency, owed their dad or mum firm overpayments primarily based on recoveries from 3AC.

The grievance mentioned that DCG issued a $1.1 billion promissory observe to the Genesis entities, which profited by “lots of of tens of millions of {dollars}“ with out struggling any loss from the default of 3AC in 2022.

In line with DCG, the corporate issued a 10-year promissory observe to Genesis World Capital in June 2022 as a safeguard in opposition to any potential “gap” in Genesis Asia Pacific’s fairness that would have been attributable to the collapse of 3AC, considered one of Genesis’ debtors. DCG alleged that reasonably than going through vital liquidity issues from 3AC, Genesis “reap[ed] an enormous windfall” and was obligated to return funds made on the promissory observe. 

The latest grievance was simply the newest authorized entanglement between DCG and Genesis over the collapse of 3AC. In Could, Genesis filed lawsuits in opposition to its dad or mum firm, associates and CEO Barry Silbert, alleging fraud, insider enrichment and hid transfers. The corporate sought $3.3 billion over DCG allegedly withdrawing funds earlier than Genesis’ chapter. 

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The $1.1-billion promissory observe talked about within the submitting was issued in response to the collapse of 3AC, with Genesis probably going through a shortfall in its fairness for the second quarter of 2022.

Nonetheless, DCG famous that “cryptocurrency costs ultimately recovered,” permitting Genesis to make use of 3AC’s collateral — shares of Grayscale’s Bitcoin Belief, which elevated in worth with the value of the cryptocurrency — to revenue from the loans. 

“[T]he incremental quantities realized by Genesis after issuance of the Word had been, primarily based on the pleadings filed by Genesis on this Court docket looking for approval of that transaction, excess of ample to beat the prior $1.1 billion collateral shortfall—and, on data and perception, allowed Genesis to revenue from [3AC]’s default by recovering practically $2.8 billion on the unique $2.36 billion in [3AC] Loans,” mentioned the submitting.